15.5%. 2241. we're moments away from dell's fourth quarter results. standing by for us, waiting on the number, senior analyst with motley foole. rick, great to have on you the program. what are your extensions on dell here. >> we could cheat here because obviously hewlett-packard had a great quarterly report yesterday and although they're not siamese twins obviously and it's always del winkle sleeping at the wheel over the past couple of years and dell will put it together. although flat revenue i think that the bottom line will be strong. because the company has been cutting costs anywhere that it can so i'm look for a decent quarter on the bottom line and a reasonable quarter on the top. >> so, rick, we've got $13.8 billion is the estimate on revenue. the numbers are imminent. where would you see the growth coming from dell? >> the growth right now, if you look at where dell was a year ago, those last

november/december of 2008 and january of 2009 that's when the, was hitting rock bottom. empty cubicles so no one was ordering computers. obviously the last quarter, the company's third quarter was a dud. it wasn't very good but you look at things now and compare to what it was back then when the economy was at its darkest. cubicles need computers. and an economy that is showing signs of life. easing up on their pocketbooks as companies like cisco who admitted they'll be spending more year and i think that that will help dell, ibm and all of these companies. last night we spoke with mark hurd and he said that he wanted to talk europe positively. how he continues to see europe on the slow side versus real vibrancy coming out of the asia. do you think that we'll see a similar situation out of dell? >> yeah. definitely. i mean, dell isn't the same kind of global player as an ibm or an hp, but the company's obviously making inroads. they obviously want to beach hp -- they want to become a global dynamo the way that hp and ibm have and i think that

you will definitely see that and like mark hurpd's company, able to squeeze margins. the story at dell. it's making serious inroads on the bottom line and even the top line will probably be flattish today. >> uh-huh and do you think that we'll get good guidance in terms of 2010 and in terms of the next couple of quarters from dell? what you are expecting out of the forecast? >> yeah, there's so much pressure on dell. after hewlett-packard raised their guidance, dell has to. no way that temperant enthusiasm that the point. it has to go full throttle and paint the cherry picture because it's the picture that dell started to color by numbers yesterday. >> the competition is so steep in this space, rick, i wonder if you think that dell is going to be forced to merge with another player to get -- to really best compete? >> yeah, i mean i guess there are so many -- they're doing -- the companies like dell, hp and ibm, they're buyers right now just as hp bought -- and dell obviously bought perot systems. i don't know if they will ever

merge, if you will ever see that apple are obviously on their own plane. will not emerge with dell or hp. i cannot picture getting married. they will continue to make their small acquisitions where the mergers are higher and improve operations along the way. >> right and what do think is the most important issue that really drove the quarter in the last three month for dell? >> i think what's going -- it's going to be the enterprise side, the large and the small businesses, how they have done year over year. i think it is important that the economy needs a good report out of dell to hey, things are turning around. you can be more confident out there and i think that dell's numbers will hopefully indicate that they've stabilized on that front if not turned around. >> we need to see enterprise growth for sure but also need on know that the profit growth will not only come from cost-cutting. do you think that this company is done cutting? >> well, no, as of last quarter at $1.6 billion annual run rate and they want to go up to $4 billion. the second billion goes down early easy.

the third billion and the fourth billion it is a stomach full. >> but as far as cutting -- >> sorry about the food talk. >> yeah, that's funny about pizza. but as far as cutting employees and really cutting back, are they done with the cost cuts? >> no, they can't be. they're just one-third or half of the way through the cost cuts it will have to be more people, sadly. and these are things if dell could have cut $4 billion a year ago, they would have. obviously something that has to be gradual, step by step. and you hope that these cuts are not going detrimental in the long run. >> rick, wes have numbers. interrupt you we've got numbers. >> let's go. >> non-gaap 20 cent a share. again, 28 cent a share versus estimate of 27 cent a share. your knee-jerk reaction? >> wow on the revenue side of

the earnings i think that we all expected. only missed one quarter over the last year and change. that revenue is a big, big hearty gain p it's definitely -- i was hoping 14.1, $14.2 billion and i thought i was being optimistic. obviously the company's doing something right now. >> all right so would you commit new capital to this stock at current levels? >> i don't tone personally but definitely an interesting time to buy it now, the stock is still cheap. forgetting that dell was a major player and will be a major player in the future. i think that there's a lot of upside and especially now that the top line is playing along. >> all right, rick, thanks very much. we so appreciate your time on this. a senior analyst with motley fool. get to tyler mathisen he's at the headquarters with more on the dell. >> reporter: a little more detail here. a modest beat, 28 cents a share versus the estimate of 27 cents as you mentioned. the company saying that it was better across all of its business segments. the revenue's up 11% year over year. 16% sequentially. and notably here, notebook's up

32% year over year, notebook shipmentis should say. 32% year over year. people had been look for improvement in that personal computer segment where dell has fall tone number three behind hp and aser and there you can see some indication that the company is improving at least on that yardstick. so once again, maria, maybe not, but revenue number as the guest just pointed out $14.9 billion much higher than the $13.8 billion, that was the consensus estimate just a few moments ago. anyhow, back to you. >> all right, ty, thanks so much. look we just saw the stock turnaround, actually, ty as you were talking. earlier, right as soon as number numbers came out we saw money moving out of dell. yesterday we did get those strong results from rival hewlett-packard. hp's first quarter profits up 25%. the company made $2.23 billion in the quarter beating wall street's expectations. also revenue was up 8%.

hewlett-packard generating $31 billion in revenue and as you can see versus the revenue that we got today from dell computer. cash flow at hp, soared 114%. the cash flow in their $2.4 billion. last night on "closing bell" you saw our interview, hp chairman and ceo mark hurd talked to me right after the numbers were released and he told me europe remains slow but that printing and enterprise drove the quarter. >> caller: we had 27% growth in our server business. we had 20% growth in our pc business. we had one of the best numbers that we'll have and i don't know how well it'll be picked up, but printer unit growth was 16% returning that to very favorable growth in printer placements and supply's growth on a local currency basis is the highest that we've seen in quarters. so you mentioned the cash flow number, but inside the numbers, are there some pretty important number as it relates to particularly some of our

hardware segments. >> mark hurd also adding while the company is seeing improvements in asia business in europe remains slow, which is really inline with what we're hearing across the board for a number of multinationals. we've got julia boorstin on tap with breaking news. >> reporter: maria, the numbers in from cbs. $3.5 billion. higher than the $3.69 billion that is expected. earnings per share inline as expected. maria, it's interesting, when you look at this company because it's so reliant on advertising, it can be seen as a bell weather f -- as a bellwether and also into the operating income by division. the entertainment division operating income increased, cable networks operating increased by about 50%. so we are seeing progress both in entertainment and cable networks. publishing operating income down. and the content group did see an increase there. so, maria, as we head into this conference call that we'll be

starting shortly there's going to be a lot of attention of what les moonves do say about the advertising markets and the outlook for 2010 but eps did come right inline with expectations. back over. >> more breaking news in the auto sector. phil lebeau has that. >> reporter: reported last night and reported all day today, as expected the national highway traffic safety administration has opened up a formal investigation into the power steering of 2009 and 2010 toyota corollas. there have been about 156 complaints so far regarding the '09 corollas in the power steering not being responsive, and again, nhtsa opening up a formal investigation into the '09 and '10 corollas. no response yet from toyota. maria? >> all right, this story continues. it's amazing, phil. thanks very much. phil lebeau with the latest on toyota. still to come on this busy edition of "closing bell." we'll look at trend in the labor market all of last year? wheth all of that taxpayer money got it done?

welcome back. let's take a look at the other business headlines that we're covering tonight. oil closing at the highest levels in nearly a month. finishing tonight at $79.06 despite a much higher expected rise in weekly inventories. consumers keep cutting back on spending. cut daily spending in january by as much as 14% on a month-over-month basis. that brought spend down to levels not seen since january of '09 when the economy was in the middle of a recession. amazon.com is launch a new kindle application for blackberry users. app will allow most blackberry uzers to download more than 420,000 books to their devices. 420,000 books on your blackberry. mary thompson has our eye on the floor of the nyse with all of

the happeningings today on wall street. >> reporter: hey there, maria. we had a rally wall street today despite some mixed economic data and mixed outlooks from corporate america. the dow and the s&p putting together their best three-day win streak since november and the nasdaq really a standout, up for five sessions in a row. its first five-day win streak since december. basically what we saw is a midday jump in the s&p, for the most part. the markets were -- or kept under eye guess you could say, a little bit of pressure because of a larger than expected jump in weekly jobless claims, higher than expected reading on wholesale prices for january, and also a disappointing outlook from walmart and then the s&p moved above 1103 and that's been an area of recent resistance for the index. once it moved above of those levels ahead of options expiration tomorrow the rest of the market started to rally and moving to the levels where we saw it close up 83 points. the winning sectors today were materials and industrials. a they've benefitted from the stronger than expected read that we saw from the philadelphia

region, the philadelphia manufacturing region. also tech benefiting from strong numbers from companies like hewlett-packard. the only weak spot today was really telecommunication. this group was weak throughout the session. as we mentioned walmart was a shook we were watching throughout the day. the worst performer in the dow jones industrial average. its fourth quarter results were better than expected. first quarter -- or forecast was disappointing and disappoint in fact same store sales numbers were weaker than expected. hewlett-packard another dow component yesterday after the bell reporting strong numbers and giving strong guidance for the year of course help happened the rest the tech sector today and standout today to the downside is well-care. last quarter were better than expected very disappointing outlook for the year and it's stock tok a hit today. >> mary, thanks very much and of course the market continuing to climb high wert dow finish in positive territory for the fifth consecutive trading session as mary just told us. joining me now to talk about

whether this run continues is citi's chief u.s. economic strategist and president and chief investment strategist with ycme advisers. gentlemen, great to see you. welcome back. how are you telling people to invest? what are your recommendations for clients in an environment where we have had this rally and the market is now back to 10392 on the dow? >> we still think that the market can move higher. valuations are implying that people don't believe that there is real earnings growth in the market over the next few years and cited in the industrials and in particular in capital goods look very good. more select areas in technology, like software and services. and we'd also be looking at energy here. these are areas that we think that are really opportunistic. >> energy certainly continues to be hot and seeing that energy story. >> certainly we've seen it. i think that a lot of investors have been overly worried about the economic conditions.

credit's come in a lot in terms of the spreads. that typically takes down the cost of capital -- allows companies to invest and that's what we really want to see and we think that we're in this good condition for the next two, three quarters. >> michael, what do you think? what are you looking at? >> well, i first of all think that there is too much negative sentiment in terms of earnings potential and i think a lot of negative sentiment about what is happening with the companies who really have the opportunity to rebound in at least a tepid growth cyclical bounceback. companies like general electric, which i think that are really oversold based on a tremendous amount of fair. i think that ge is well functioned for the next five, ten years. start positioning for inflation but i think that the commodities still make sense and as always i think that you need to make sure that you are looking at asia, but not, i think, maria, just china. people focus on china as the only place to invest inas. there are actually other count fleece asia, countries such as indonesia, singapore, korea.

>> so when you say those are opportunities, i do want to be invested in those local markets? i do want to be invested in the companies that have exposure to those growth spots in the world or how do i participate in that hot spot? >> that's a great question. i think that really if you have a strategy that is a combination of u.s. equities as well as international equities i think that your u.s. equities, at least one-third of the revenue from those u.s.-based equities, multinationals, need to come from overseas and in particular asia. but i also think that you need to invest directly in those countries. whether it's through an etf and are there plenty of etfs out there that you can purchase that participate directly in individual countries. i don't think that you can just buy the multinationals and expect to get the kind of bang that you need to get, considering that the u.s. is likely to have slow gdp growth going forward. >> and when you say slow gdp growth are there areas in the gdp that you think that will grow faster in the other areas and is what that what we should

be following in terms of investing in that growth. >> yeah i absolutely believe that. really in u.s. equities you need to invest in what we call tailwind industries, sector themes. i think that that is going to be an increasing revenue driver for technology companies as hardware and even though dell's numbers came out that maybe were a little bit more optimistic than some might have expected. i think that services, and in particularly services that can really spread across, not only the united states, but across borders. such as ibm, i think that those kind of company will do well, and in the u.s. companies i think that you have to have those tailwinds because i think overall gdp growth is going to be less. and if is t is you have to be selectnif how you are invest your equities. >> tobias, let he ask you, you said that you would like to position yourself toward. what do you want to avoid? are there areas that are sort of on downgrade watch? >> yeah i think that some of the traditionally defensive sectors, household, personal products for example, valuation are pretty

expensive, food, beverage and tobacco where is failing. pharma and biotech where i think that the investors think that they are cheap but actually indicating something about long-term prospects and diverge a little bit from my colleague, you know i think that the commodity play and kind of the international play is so consensus-oriented a lot of good news is priced in. i don't think that you have to avoid it but it's not area that you really want to overweight. ipin western canada right now talking to a lot of investors who are very well positioned here. they're not looking to get positioned, they're already there. >> i was wondering where you were. what a gorgeous shot behind you, you're in canada. >> i'm in vancouver and hope to see my team canada win a little bit later here. >> go enjoy the olympics. gentlemen, thank you very much. see you soon. appreciate it. tobbas and michael. get to the flash desk right now. we've on got a news flash from matt nesto. >> reporter: plaria, update you on the first solar. it's a $10.7 billion market cap. fourth quarter number, comfortably ahead of assets. 47% revenue growth also beat the

forecast. looks to be a wide margin, 605. versus a 644 estimate. the revenue's also look to be greater than or equal to the stock. you can see weakening up, maria, but it's been up 15% in five consecutive days. so the lack of an upside surprise, is seen as a disappointment. >> back to you. >> thanks so much, see you later, matt. just ahead we go deep inside of the toyota recall. we'll get the view from ground zero. this timeul hear from the dealers.

welcome back. toyota's troubles keep on mounting. the automaker now fapss a transportation probe into power steering problems in the popular corolla car but hour all of these problems for toyota impacting the dealer? cnbc's phil lebeau in chicago with that angle. >> reporter: is certainly doesn't help. let's quickly update with what is happening in the toyota investigation. nhtsa investigating '09 and '10 models checking out responsiveness of the power steering. if you go out to ground zero you have to go out to california, southern california. the top leading dealer in the country. his dealership or that dealership has sold 15,000 cars last year. they're work 24/7 to meet customer call -- recall demand.

general manager tom rud ne who runs the dealership says believe it or not they're holding up better than expected given all of the news. >> it's been surprisingly good. we're -- our sales, year over year, are only down slightly. we're down longo at toyota only 20 units through the first 16 days in february over last year and that's with having to stop sale on eight our vehicles so we're -- we're very optimistic about this month and the rest the year. >> reporter: for those dealers who are facing pressure, toyota plans to offer a major marketing campaign, maria. that's going to start early next month. expect incentives and rebates far beyond anything that we've seen from toyota in the past. they want to get past these congressional hearings which start next week. >> absolutely i can imagine. phil, thank you. is taxpayer money really getting the job done when it comes to putting people back on the job? coming up some surprising data in the labor market. what is t says about the real impact the stimulus bill when we come right back. $$$$$$$$

breaking news from the federal reserve, unanimous and significant changes in its discount lending programs. federal reserve saying it is raising the discount rate from 1/3 percent to 3/4 percent effective tomorrow. increase in the discount rate widens the spread between the primary credit rate and the top the fomc's 0 to.25% rate from the fed funds rate to 0.05. the board also announcing as of march 18th the typical maximum maturity will be shoernted overnight. the term auction facility is raised from 3/4 to 1/3 point. announcement just released in light of improvement in financial market conditions it has unanimously approved these

modifications to the limits to the discount lending programs and the fed says like the closure a number of its extraordinary credit programs earlier this month, these changes are intended as further normalization of the federal reserve's rending facilities. go onto say these changes are not expected to tighten conditions for hougs holds and do not signal any change in the outlook for the economy or monetary policy. maria? >> hampton, thanks very much. breaking news here. big story late in the day, cnbc's steve liesman's with us on the telephone, tyler mathisen is at the global headquarters and also in the discussion and we also have chief economist with ihs global insight. we're going to be talking about this change. let me get steve liesman's immediate reaction to this. the discount rate raise i guess we shouldn't be surprised, steve, but interesting timing on it. >> caller: yeah, maria, this was pretty well signaled.

go back last week the federal reserve mentioned. what the fed has done, maria, is really faciliollowed the path o least resistance in terms of tightening. that the credit markets didn't need the fed has really either whithered them down or gotten rid of them and the primary credit is where banks go to the window for emergency funds, really very little used over time as we've exited the financial crisis and credit markets have normalized. so what the fed is doing, remember back in august of '07, it tightened that spread to fed funds and made money a little cheaper for the banks, then it tightened again from a hundred to 50 down to 25 and now it's going back up 25 and you can expect more of these, maria, in the coming probably -- i don't know, weeks or months, certainly the fed's going to make that emergency money more expensive fors banks in the trust to normalize its lending. >> yeah and interesting to note,

you know that the fed did also say that there's no intention on raising rates for consumers. so really putting it out there that this is simply to start winding down as they have signaled, as steve just said, the stimulus that has been put in place. what are your thoughts on this? >> i completely agree. i mean, normalization is the word of the day. i mean, they were unusually accommodative to try to fix the banking system, to save the banking system. they don't need to do that anymore. so these are -- these are very predictable and well-announced steps in which they're going to essentially move away from that extreme easing but i agree, it shouldn't have an affect on consumer markets, on the housing market. these are fairly noncontroversial kind of moves. they really should be making. >> having said that, interesting to note, david rosenberg, that the move comes after the close of trading. >> well, the timing is a little unusual but you know, maria, there's been talk for, really, the past couple of months that

the fed could raise the discount rate at any one of the last couple of meetings. i think at that timing is obviously a surprise whenever they do anything after the markets close. if you remember when they first started cutting the discount rate back in august of 2007, they did it before the market opened so maybe it's a perfect bookend but it's more symbolic and maybe psychological. >> well, what i want to hear from you as well from nariman is really, what kind of an impact that this does have on investors? tyler, get this over to you, though. you know 25 basis points obviously it's a small number and we're still only at 75 basis points when you look at the discount rate. so it may very well be what david just said, and that is not necessarily major impact but a signal of what's to come >> reporter: i think that you look at a couple of things and they certainly hinted in this in the minutes that were released yesterday that probably the first such move they were going to make was going to be to raise

the discount rate. look at it this -- and also at the same time continue to keep the fed funds rate low for an extended period. could that be a matter of months. but you can look at that this way, they're taking out the emergency help that the financial system, the banks needed. you can look at that as a very positive thing. they're reestablishing, if you will, the penalty for banks that come to the fed for an emergency loan. they're basically saying that the conditions have improved, i would read it this way. i'd be interesting to hear what steve thinks. that they're basically saying that those conditions requiring extremely generous levels rates from banks that come from emergency loans, no longer the case. i look at that as a plus. >> maybe, but you know what, steve liesman, let me get your thoughts on this. no matter how you are looking at, it i look at the futures right now and they're down in the extended hours so the market's going to focus on every move. >> caller: well, you know, maria, what you have to ask yourself is, what else now needs

to be normalized? and i'm reminded of the minutes yesterday where and i'm quoting here, several participants said, the fed should think about selling assets in the near term. that might be just four of the 17 members of the fomc. what else does normalization mean and how soon will they normalize? for example, let's say you have an exceptionally low fed funds rate. that 0 to 25, maria, but if i told you that the fed funds rate was going to 25 to 50, would you say that's still exceptionally low? you could make that argument. so now the fed has to come out and start plaining what it means in terms of normalization. if things are normal, there are other things that are abnormal. there's a very low fed funds rate, there's a low interest on reserve rates, there are other programs that are out there. the fed continues to buy mortgages, it holds at 1.25 trillion or it will by the end of this quarter, 1.25 trillion. so when the market goes down it's saying, tell me what else does normalization mean?

>> what kind of an impact are you expecting here, david? >> well, i think that you know we're obviously getting a knee-jerk reaction into the markets because the timing comes as a surprise. there's no material impact on corporate earnings or on the general level of interest rates from what the fed just did. it's purely symbolic. i think what's going to be more important is once the fed begins its exit strategy in terms of no longer purchasing mortgages, let alone reducing, as steve had said, the fed owns more mortgages on its balance sheet than it does treasury securities. that's never happened before. so to me what's going to be more important for the economy is once the fed about pulls its exit strategy in terms of the mortgage market, what do mortgage rates end up doing? that's going to be much more critical in the next several months. >> nariman, how do you see it. >> i agree is with both steve and dave. steve in the sense these are really at this point just ba baby steps towards normalization but i think that david's point's

a valid one. i think that will test the market in terms of sellings mortgage-backed securities. it will not do anything in a hurry. it will test it, if the mortgage rates go up, it'll pull back. housing's still very fragile. >> right but we all know that it's not necessarily a major move that the market will react to but signal it's symbol of what's to come, and now we know what's to come. it shouldn't be a surprise because they told us yesterday and they've been telling us that this exit strategy is critical. >> you're absolutely right. and i think, you know the market's going to react, nevertheless the era of sort of free money is over. so the market's may be a little unhappy. i don't see a big reaction to what was done today. >> david, as far as speaking to clients, what do you want to tell them? light of this? >> well, look, i think that we're still in this postbubble credit collapse. we're obviously seeing the government stimulus' percolate its way through, there's been some invent or adjump, this time last year negative 6.46% gdp and

by the fourth quarter it is 5.7. it's just typical whether you're looking at the economy or the markets. we're in this intense period of volatility. and what i'm telling clients is no different than it would had been a half an hour ago or last week, which is that we have to focus this year on minimizing the volatility in the portfolio. >> minimize the volatility. how do you do that and the risk? >> well, like, for example, like lech ken schets and associates. we have a long-range short strategies both in income long/short. equity long/short. that will actually take the volatility out of market. it's negatively correlated with stock market. so if we have the sort volatility and weakness and in some sense a reverse image of the sort of very pro cyclical risky beta trades last year i think that this year will be the year where we unwind some of that euphoria than long/short strategy, hedge fund strategy,

real hedge fund strategies are going to do just fine. >> tyler, lets take a look here on the extended hours. i know that you have got your screen in front of you. i'm looking at the euro and that's dropping. an e-mail from a viewer noting it's at a nine-month low. take a look at the futures now, the s&p future and the dow futures. we want to see the impact that this is having in the extended hoursancy again we've got volume up, tyler. >> reporter: yes and not particularly a great recipe for equities in recent days and there you are looking at s&p futures down very sharply on this news that we've just reported about the raising of the discount rate. so there may be this kind of early response, as one of the other panelist said, a kind of knee-jerk reaction to this news, that what we knew was coming has actually come. >> yeah but you know, what steve liesman, i knew that we knew this was coming but did you expect it today? >> caller: you know i have to tell you i asked larry meyer

yost "squawk box" when is the fed going to hike the discount rate? he said anytime. >> you oh god that's amazing. >> caller: so, yeah, this was as well telegraphed, maria, as any move that the fed has made while i've been covering the fed. i will tell you though that you might have a knee-jerk reaction in equities but the telegraphing from the federal reserve is that the fed will remain easy as far as equities go for many months to come, and in fact, this move almost underscores that. think about the process to normalization. the fed's going to raise the discount rate by 25 basis points which, as david said, has almost no impact at all on corporate earnings. as the fed says on households. go 25, 50, 100 that's right part of a normalization and the fed remains easy. it keeps telling us it will be exceptionally low for an extended period. one period, one voter defented from that so my guess is that you have 2010 pretty much clear sailing or at least most of it as far as being favorable for

equities. and in fact, what would be interesting to see eye don't know if you got a read on it, i'm in a place where i can't see it, but what's topped long bond here? if this ends up capping the curve and reducing the steepness of the curve and then ultimately that is helpful for the economy and for the households. >> back in a moment on "closing bell."

welcome wack back. we are breaking down the news of the night and it's just happening just about 15 minutes or so ago. the federal reserve raising the discount rate by 25 basis points. we've got tyler mathisen, steve liesman, nariman, david rosenberg, all joining the conversation as well as karen finerman, "fast money" contributor. karen, your thoughts from the fed's move tonight. >> reporter: timing was at expiration tomorrow. i can't help but thinking it is a message but i'm thinking we're short the long end the curve. i don't know how much difference this move will make so if we do see a big move in our favor tomorrow we'll probably look to flatten out a little bit. >> and the bottom line here is

this is probably the first step in many steps to come in terms of unwinding the extraordinary policies that were put into place. steve liesman, if you had to guess when we would see the next move, when would that be? >> caller: well, you know i think it -- i don't understand actually, yet, the process by which the fed wants to normalize. the speed of it is unclear to me. the staff in the minutes yesterday talked about going 25 and 50 and the board ended up doing exactly at what staff recommended so i said -- think it might be another month or so before another 25. and then i think it was david who said earlier that what the fed wants to do is see how the end of mortgage purchases plays out in the market. i think that's the next significant step the fed is going to take, which is to stop buying mortgages and see how markets react to, does the private sector and the bs market, the mortgaged-backed security market secure itself and how rates do the rates go?

no high drama until it gets a real good feel until the mbs purchases plays or stopping it. i know that we will see is we will see tests of term deposit, these are big-time certificates of deposits that the fed want to do in order to soak up excess reserves out in the market. it's going to test those this spring. it's told us so. >> right. founder of pimco the largest bond fund manager on the telephone with us. bill, we so appreciate you joining us and calling in on this news. what's your reaction? >> caller: well, i guess i'm in steve's camp, maria. i mean today's move is sort a continuation of several exit strategies which have been discussed and announced over the past five, six, seven months. i mean the end of various quantitative easing programs which steve talked about which involves the purchases of treasuries in agencies and no n mortgages which is being played out by the end of march, to me, is the largest tightening policy

shift and that's the one that we have to watch. its affect on the intermediate and longer the end of the curve as opposed to the short end. i think that this move is more of a classical, monetary policy maneuver but more of a normalization step as opposed to the beginning of an interest rate increase or any tight frengt standpoint of interest rates and i think that's pivotal for bond investors. >> i see. this is a small move, relatively speaking, and we were expecting it. i don't know if you were expecting it this soon, but bill, does this change your investment strategy in any way over the near term? >> caller: no, i still think that the interest rate strategy in terms of short rates, in terms of the policy rates,s fed funds rate is really critically dependent upon the growth rate of the economy and the progress up or down of inflation. and we're still relatively comfortable, as a think the fed is, in terms of maintaining policy rates close to the 0%

level. the biggest question mark and what we've seen over the past few weeks and in the past several months is the move, again in intermediate and in mortgage markets relative to what the fed has been buying. i mean they've been writing checks for trillion and a half, trillion and three quarters over the past 12 months and when that stops, as it stopped in the uk over the past several weeks, you know that critically is the tightening policy that i think markets should interpret. >> bill, are you surprised that we're seeing the futures trade down in the extended hours that we're seeing a reaction as we do watch as anticipated the stimulus programs unwinding? >> caller: well, i guess i would have interpreted it that way, too. i mean it was a surprise from the standpoint of a thursday afternoon. you would expect this to come more in terms of an expect this more in the terms of an announcement in policy meetings in the aftermath. so it was a little bit of a surprise.

although some would say it's been telegraphed. so in the after market where liquidity is thin, the only way for markets to trade down is to trade down until we renormalize it and rethink it overnight. >> thanks so much, bill gross. thank you, we'll see you all soon. thanks, everybody. we will take a short break and come right back and continue translating what's gone on in the extended hours and get you set up for tomorrow's opening bell. by 2010, 30%... of the data stored on the world's computers will be medical images. the trouble is all of that information is trapped. x-rays aren't talking to... medical records aren't talking to... patient histories aren't talking to... insurance forms. we're trying to connect all that data... make it smart. we would see the patterns in your medical history... in the histories of entire populations.

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welcome back. a big breaking story in the extended hours tonight. joining me now, ira jersey. thanks for stepping in here as we all digest this news. the stock markets close. after the close, the federal reserve announces it's raising the discount rate by 25 basis points, sending the dollar sharply higher and the futures market lower. what's your strategy? >> this was a weak day for treasury market overall. but the front end is getting really hit by that. what that means is that the two-year treasury bond is selling off quite dramatically. the market expects this to be more of a little bit of a policy towards higher rates in general.

we're not convinced they're going to raise rates before november, but i think it does signal a willingness by the fed to start to think about their exit strategies much more. enyou have heard more fed speak about that. >> maybe. they're going out of their way actually in saying that this is not, you know, a change in monetary policy. but some people are saying look, actions speak louder than words. we're looking at the reaction in the extended hours tonight. >> that's very true. one of the things we have to remember is that the changes to the discount rate, the differential between the fed funds target and discount rate was changed back in august of 2007 to basically try and quell some of the issues with the financial system back then. and this is just an unwind of some of those. i mean, they've already closed a lot of facilities that weren't being used. the changes to the discount window is just another reduction in that financial crisis emergency packages that the federal reserve had built up. there's only $15 billion

currently at the discount window. that's down from well over $100 billion at its peak. and remember, the fed balance sheet is $222 billion. $15 billion of that is at the discount window. >> isn't it interesting that the decision to start normal liezing thing things happens in the middle of a meeting? does this indicate how serious they feel this is an issue, they need to come out with this news now even before the next fed meeting? >> well, it was clearly talked about at the discount rate meeting that the federal reserve presidents have. and the fact that they did it after the minutes i think is kind of interesting. because yesterday they talked very clearly that there is a big disconnect in a number of members. there's three camps we think within the fed right now.

there's one that wants to basically start the exit strategies tomorrow, another camp, which we think chairman bernanke is in and made clear last week in his testimony before congress, which is we'll start to sell assets and we'll start to do these other things, but after we hike. and then there's a middle camp that says we would love to get rid of some of the assets on our balance sheet but we're not going to do that until we're shoe the economy is in full swing, and we're not going to destroy things. they don't want to make a policy mistake. they still think the economy is fragile enough they don't want to push us back into a recession. >> thanks so much for stepping in and talking to us about this. we appreciate it soon. stay with us back in a moment with more. , seeing if we have enough points to stay longer. now? you don't have enough time... and you have to push all those buttons... no buttons, someone answers every time. yeah, right... bet you a massage... yeah, ok. hi, julie... i have a question about my points. hi, what button do i press for a massage? hello? new chase sapphire... you call. we answer. no waiting. just press right here...

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>>. >> welcome back. we want to show you what the dollar is doing. we reported the news, the federal reserve has hiked the discount rate in a surprise move tonight. 25 basis points to 75 basis points. the euro now at a nine-month low, the dollar soaring in the extended hours and the futures market lower. s&p and dow futures under pressure tonight. stay

a look at the skyline of vancouver on a thursday afternoon. the games continue and the curling never stops. welcome back inside the vancouver olympic centre. it is day three of the curling competition. hello again. jimmy kimel said curling makes bowling look like wrestling. david letterman says it's consistently ranked theç numbe one brook-related sport. considered quirky by many, it is serious business this afternoon for the american women. after dropping their first two, debbie mccormick and her squad are looking to pick up their first win against denmark. this is a very important game for the united states. another loss would not eliminate them but would make it awfully tough to advance down the line. >> fre i